Employee feud scaring clients of Independent Portfolio Consultants
Workers tried to force TAMP into bankruptcy, then pulled petitions, but damage was done.
“Never a borrower or lender be.”
Perhaps those words by Shakespeare should have been taken to heart by Independent Portfolio Consultants, a registered investment adviser and turnkey assets management platform in Boca Raton, Fla., and some of its workers, who found themselves embroiled in a dispute over debt that boiled over into bankruptcy court and is now costing the company business.
Eleven years ago, IPC was part of The Advest Group, a retail brokerage firm that was sold to Merrill Lynch. Management of IPC wanted to buy it and they financed the acquisition, at least in part, through loans from employees, according to Bert Moerings, an IPC founding partner and former vice chairman of the company. The loans were structured as unsecured certificates, or debentures.
In December, after determining they weren’t being paid back in a timely manner, some of the firm’s employees filed petitions seeking to force the firm into involuntary bankruptcy. According to the bankruptcy filings, eight employees sought a combined total of $1.4 million. The individual debenture claims ranged from $7,000 to $400,000.
The bankruptcy petitions were withdrawn after the employees were either paid back or issued preferred shares in the company. But the reality of employees trying to force the liquidation of an employer was not lost on clients and companies doing business with IPC.
As recently as November, the firm had as much as $2 billion under management, but at least a third of those assets are on track to move elsewhere.
When the news initially broke, the municipality of Macon-Bibb County, Ga., was among the first to publicly step away from IPC by announcing a search for new management for its $230 million pension portfolio.
Insurance company New York Life, which had approximately $400 million on the IPC platform, has advised its reps to move all accounts off the platform by May 1, according to sources close to the company who did not want to be identified. New York Life declined to comment.
And Garret Wong, a sole proprietor financial adviser in Anchorage, Alaska, who had $50 million of his $110 million under advisement on the IPC platform, is in the process of moving all client assets off the platform.
“Involuntary bankruptcy usually means liabilities exceed assets,” Mr. Wong said. “I’m not sure what it all means, but a degree of uncertainty has been framed up so we’re changing our services to another firm.”
Cheryl Underwood, who worked at IPC for nine years as an adviser, said despite pressure to do so, she never purchased any of the debentures. But once the bankruptcy petitions were filed, she alerted her clients, one of which was Macon-Bibb, and then resigned from the company. She declined to comment further.
It is not clear how IPC paid off and/or renegotiated its debentures. IPC executives did not respond to requests for comment for this story.
Mr. Moerings was fired in November as part of a sweep that replaced most of the company’s executive ranks over the past six months.
While he was not a plaintiff in either of the involuntary bankruptcy filings, Mr. Moerings was one of the employees who loaned money to the company. His note was converted into non-voting preferred shares last summer.
Mr. Moerings, who is now tied through his preferred stock to the future success of IPC, justifies turning to workers to help finance the buyout as one of the “ways of asking employees to contribute to the future of the company.”
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